The End of the Gold Bull Market

THURSDSAY AFTERNOON WRAP-UP 2-2-12
Things are getting interesting again, with the Cartel nearing the end of its nine lives, though not dead yet. It’s not just that the VERY KEY ROUND NUMBER of $1,750 was finally breached after ten attempts over the past three days, and thirty in the past four months, but the manner in which it did so. Gold is again looking impervious to Cartel games, albeit still fought tooth and nail for each dollar, particularly around the key $1,750/oz line in the sand. I believe a run at gold’s ALL-TIME high, in essentially ALL currencies, is inevitable in 2012, and that the current façade of economic “stability” is growing long in the tooth.

Even oil and base metals were down today, with the only other market action in “new age internet stocks” like Linked In and Groupon, tech bubble holdovers awaiting their turns in the historical equity trash bin. You’d think the world learned a lesson after 99% of all tech stocks crashed and burned in 2000, let alone a two-bit “social media” company, and one peddling the all-time most commoditized product – COUPONS! But then again, DERIVATIVES have soared in scope since they nearly destroyed the world four years ago, and given that 75% of all stock trading is now HFT, with Goldman Sachs accounting for something like 15% of ALL TRADES, it should be quite clear that what you observe on your screen is, for the most part, a fraudulent Matrix of reality.

Per today’s gold chart, the first smash occurred when gold attempted to again breach $1,750 at EXACTLY 3:00 AM EST, and again just before the COMEX open at that same line in the sand. Finally it surged past $1,750 later in the morning, just as “Helicopter Ben” commenced his Capital Hill testimony. The fact that he is even paid attention to is remarkable, let alone revered, as a moronic Merrill Lynch broker espoused to me last summer, calling him “the most powerful man in the world.”

Powerful, yes, but impotent at best, and destructive at worst. His comments today reeked of helplessness and cluelessness, citing the potential for a “sudden financial crisis” at any time while again stating inflation is not a problem. Learning from the “Maestro” of MONEY PRINTING himself, Alan Greenspan, Quivering Lip Bernanke blamed the government for taking on too much debt, despite the fact that his organization has indebted the nation more than all U.S. governments combined. Not to mention, that the Fed is simply a GOVERNMENT PUPPET to start with!

Back to the topic of government Terminator programs, does anyone recall the term “safe haven” applied to U.S. Treasuries anymore? It used to be as common an association as “black and white,” or “cat and dog,” but somehow you rarely hear the terms “Treasuries” and “safe haven” in the same sentence anymore. Sure, Treasuries have gone up in price during the recent years of economic turmoil, but by now the WORLD knows it’s entirely due to U.S. government monetization via its various “QE” programs, such as the COVERT “QE1”, “QE2”, and “Operation Twist” mechanisms, plus untold amounts of COVERT buying.

Per the article below, the Fed has purchased an astounding 91% of ALL new Treasury issuance since “Operation Twist” was enacted in mid-2011, coincident with the largest foreign Treasury selling in U.S. history. Interest rates may be “lower,” but none of the historic benefits of this supposed boon are being realized, as DEBT SATURATION was long ago reached. Housing continues to crash, REAL unemployment sits near Depression Era highs, and inflation continues to rise, month and after month. It is only a matter of time before this Ponzi Scheme reaches its ultimate end in hyperinflation, once and for all crashing the global fiat currency system.

…while dropping Fed Presidents with any inkling of “hawkishness.” Apparently, the most hawkish of all Fed regional presidents has an enormous personal holding of gold, but in the true spirit of clueless government officials, holds it ALL in the soon-to-be-bankrupted PAPER gold vehicle, the government-corrupted GLD ETF!

A Gold (And Physical Platinum) Bug At The Fed?

FRIDAY MORNING COMMENTARY 2-3-2012
And the battle for gold $1,750 and silver $34.00 rages on, which is EXACTLY where the PMs sit an hour after the most blatantly cooked unemployment number in U.S. history. If you think those two line in the sand numbers aren’t important to TPTB, consider the incredible brazenness of putting out a joke on the whole world like this, a 243,000 job gain compared to the 135,000 estimate, which most analysts believed to have more downside than upside. Not only that, the unemployment rate dipped to a multi-year low, even with a higher than expected -367,000 birth/death rate adjustment!

Going into today’s farce, we have seen report after report depicting GLOBAL economic weakness, with Europe and Japan in recession, China experiencing a massive construction slowdown, the Baltic Dry Index approaching all-time lows, exploding inflation in India and Iran (so much so, they agreed to swap oil for gold), and consistently non-descript (even with government fudging) U.S. numbers, including surging inventories and weak holiday retail reports. Just two days ago the employment component of the ISM Manufacturing Index declined from 54.8 to 54.3, while a day earlier the employment component of the Chicago Purchasing Managers Index plunged from 59.2 to 54.7. Not to mention the Federal Reserve, just one week ago, pushing its ZIRP timeline from “at least mid-2013” to “at least late-2014” due to a significant slowing of economic indicators. Simply incredible, to say the least.

Once again, don’t kid yourself if you think the Cartel’s $1,750 line in the sand is not a MAJOR part of today’s game plan, much as the infamous, since retracted, but never denied “gold sale headline” when gold surged above $1,750 minutes after the ECB cut interest rates to 1.00% on December 8th, per the below chart.

First off, don’t worry – IT’S NOT WHAT IT LOOKS LIKE!
OK, here’s how I came up with today’s RANT topic. By now, you should all be in better moods, given that the Big Bang Theory is one of the funniest shows on television, my second favorite sitcom of all time after Married…With Children. It’s a bit circuitous, but here goes.

In my daily planning book, on Saturday, February 5th it says “ANNIVERSARY OF THE CONSTITUTION (M).” Given my prior two RANTS regarding Ron Paul (Wednesday) and U.S. government abuse of power (Thursday), I felt today would be a perfect opportunity to pontificate on Congress’ blatant disregard of the U.S. Constitution over the past decade.

Unfortunately, when I googled “U.S. Constitution,” it says it was ratified September 17th, 1787, so I knew something was amiss. Only then did I realize the “(M)” meant “Mexico,” which in fact celebrates the anniversary of its Constitution on February 5th. Thus, my bubble was burst, and I needed to immediately find a new RANT topic.

Just then, my friend Bill Holter sent his daily missive, titled “The Bull Market in Gold is Almost Over,” which intrigued me as much as the title you see above. In it, he is not speaking of an end to the bull market in gold’s PRICE, but TIME, which I will explain further below. However, to fully comprehend the VERY IMPORTANT, TIME SENSITIVE nature of this missive (the reason it is termed a “RANTING ANDY SPECIAL”), you must first read Bill’s thoughtful, prescient piece below…

The principal message is that TIME is the biggest enemy of the “gold bug,” not price or any other consideration. This is a point I have espoused on numerous occasions, but not as emphatically as this. For some time now, I have believed the gold bull market will end rapidly, not because the fundamentals have peaked (they may not “peak” in our lifetimes), but because SUPPLY will be GONE, with all current inventories depleted and future supply spoken for by THE GOVERNMENT. Under such a scenario – clearly signifying a currency collapse or other variant of economic martial law – you will fully realize the meaning of being PROTECTED by PHYSICAL gold and silver. Yes, a whole new set of harrowing circumstances will confront the world, but none more so than having your life’s savings wiped out by hyperinflation.

I wrote yesterday of a friend espousing his belief that supply will ALWAYS be available – especially in “small lots,” depending entirely on PRICE. Believe me, he is one of the sharpest people I know, with knowledge of the “financial universe” surpassing 99% of the world’s population. But such a statement assumes gold and silver are commodities, like any other asset – financial or non-financial – as opposed to what they truly are…MONEY.

Not just “money” as currency, but under the true definition of MONEY – the only historical means of protecting your net worth, whether an individual, corporation, trust, municipality, or sovereign. There is a reason why more wars have been fought for GOLD – including Libya and Iraq, by the way – than anything else, and why essentially every metaphor describing “best in class” relates to precious metals. To whit, “good as gold”, “veritable gold mine”, “golden parachute”, “golden age”, and “silver lining.” Five thousand years of history has conditioned mankind to KNOW gold and silver are the epitome of value, and never is such Pavlovian conditioning brought to the fore more than during a currency collapse, let alone a global currency collapse involving ALL the world’s paper currencies.

As “Bill H.” writes, it is nearly incomprehensible that the “dollar system” has survived this long, but who could have known the Central Banks would (and could) have leveraged themselves so much without blowing up the system sooner? Who could have guessed a QUADRILLION dollar derivatives business could have emerged in less than a decade, with just five banks accounting for essentially all its activity, and better yet, that it could enable the system to stand on “drunken sea legs” for so long? And who could have guessed the Central Banks would surreptitiously sell their gold in the name of keeping a handful of people in power for a few short years?

Either way, MATHEMATICS 101 states this PONZI SCHEME is on its last legs, and not the “a few years out” version so many ambivalent gold bulls espouse with the typical “Wall Street hedge.” I cannot say definitively when the music stops, but I do not believe it can last another twelve months before the rumbling volcano finally erupts. The debt situation AROUND THE WORLD is untenable, multiplying exponentially amidst an environment of political and economic CHAOS, and my bet is Europe will be the focal point of the greatest inflection in global financial history.

Once such a scenario is set in motion, CONFIDENCE will erode like a “fart in the wind,” yielding maniacal, global scrambling for safety, be it in PHYSICAL gold and silver, FOOD, AMMUNITION, or, any item of REAL, TANGIBLE VALUE. I am not suggesting social chaos is imminent, but the ingredients are certainly there, and nothing makes people more “uncivil” than draconian government intervention. As much as I’d love it to end as thus, I’d lay heavy odds against it.

The scarce supply of “REAL MONEY” will be gone in the blink of an eye, soon to be followed by government nationalization of any and all gold mining assets. Will TPTB come after private holdings of PHYSICAL gold and silver, or make them contraband? And exactly who will TPTB be at this point? Who knows, but anyone in their right mind would take their chances with REAL MONEY versus the alternative of legal, but worthless, PAPER dollars, Euros, pounds, yen, and even “strong currencies” like the Loonie, Aussie, and Kiwi.

David Schectman is one of the savviest people I have come across in my business career, and no one – except Miles Franklin’s President, Andy Schectman – is more incented to hope for another decade of rising PM prices and steadily increasing demand. But neither David, Andy, nor myself believe such a scenario is possible.

Aside from likely exponential demand growth, and flat to declining production from most of the world’s mines – we have the advantage of seeing first-hand how rapidly supply dries up in times of high demand. Be it in late 2008 and late 2011, when prices plummeted (due to Cartel intervention, of course) or early 2011, when prices soared, the bullion industry has essentially “sold out” an alarming amount of times in recent years, whilst DEMAND has steadily increased regardless of short-term price movements.

I believe the Cartel will be in RETREAT later this year, potentially OVERRUN like the London Gold Pool in 1968. If this occurs – and a meaningful move above $2,000/oz gold or $50/oz silver may well be the catalyst – I expect bullion industry supplies to vanish into the ether. The Cartel will of course attempt new, intensified attack patterns such as the “SUNDAY NIGHT PAPER SILVER MASSACRE” in May 2011 and “DEATH STAR” attacks of September 2011, but just like everything else they have attempted, will rapidly run into the problem of DIMINISHING RETURNS, if hyperinflation doesn’t beat them first.

I cannot emphasize more strongly the DANGER of another “no offer” scenario occurring in 2012, potentially one that never ends. Additionally, I cannot be more fervent in my exhortation to take immediate steps to protect yourself, as nothing could be more catastrophic – and ironic – than knowing such events were imminent, but not acting to properly prepare for them.

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